How You Can Save Your Hospital a Million Bucks


What is value-based purchasing (VBP) and why should I care? Well, for starters, your hospital’s CFO might not know that starting in 2013 (just two years from now), the Centers for Medicare & Medicaid Services (CMS) will be withholding at least 1% of all Medicare payments, but CMS is giving your hospital a chance to get some or all of that money back. For a busy hospital, the withholding will easily be $1 million; for many hospitals, that figure is more like $2 million to $3 million.

SHM thinks hospitalists are uniquely positioned to be champions for the C-suite, helping the hospital’s balance sheet, aiding in staff retention, and providing better care for our patients. And that’s where VBP comes in.

In March 2010, Congress passed the Patient Protection and Affordable Care Act (see “Health Reform Turns 1,” p. 16). This law includes a provision that establishes a VBP program for hospital payments beginning with discharges on Oct. 1, 2012. Payment will be based on hospital performance on quality measures determined by Health and Human Services (HHS). The VBP program will pay hospitals for their actual performance on quality measures, rather than for just reporting those measures, starting in 2013.

This is a null-set game, in which the funding for the best performers is clearly coming out of the hide of low-performing hospitals. Funding will be phased in from 2013 through 2017. Hospitals will have their payments for all Medicare DRGs reduced by 1% in 2013, 1.25% in 2014, 1.5% in 2015, 1.75% in 2016, and 2% in 2017 and beyond. Just ask your CFO what this means at your hospital and see his or her brow furrow.

The good news (i.e. carrot) is that a hospital that meets or exceeds the performance standards will be eligible to earn back all the Medicare money that was withheld and even earn a bonus of as much as 2%.

The VBP program defines performance broadly; that means it includes the patient experience. In fact, about 70% of the quality measures will be based on clinical performance, and a full 30% will come from scores on post-discharge patient-satisfaction questionnaires.

VBP Metrics

So just what performance will be measured in the new VBP program? While physicians might see quality in clinical terms, the VBP program defines performance more broadly; that means it includes the patient experience. In fact, about 70% of the quality measures will be based on clinical performance, and a full 30% will come from scores on post-discharge patient satisfaction questionnaires (e.g. HCAHPS). To understand the importance of the patient satisfaction part of the VBP equation, just note that Press Ganey, the largest private company helping hospitals understand what their customers are thinking, is jumping into the VBP arena with both feet. Your hospital’s CFO (and lead hospitalist) should contact Press Ganey and run your current performance numbers through their VBP calculator to see if you are on the hilltop or in a deep hole.

The clinical measures will be selected from those used in the current Medicare pay-for-reporting program and likely will include measures for myocardial infarction, heart failure, pneumonia, and surgical care. In addition, HHS is mandated to include measures of efficiency, looking at ways to assess the spending per Medicare beneficiary. This is the real value equation: value = outcomes ÷ cost.

HM to the Rescue

No one in the hospital community sits more at the nexus of clinical care on these measures, efficiency, and the patient experience than hospitalists. This is an opportunity and a risk for hospitalists; that is why SHM is actively planning strategies to help hospitalists assist their hospitals in assessing how their current performance would play out in the payment world post-2013. In addition, SHM will have tools to assist hospitalists in creating change to help their institutions be in the top half of the nation’s hospitals—those who will get their millions of withheld dollars back.

SHM’s board of directors recently passed the following position statement on value-based purchasing:

“SHM supports the Affordable Care Act (ACA) Section 3001 directing the Secretary of HHS to establish a value-based purchasing program under the hospital inpatient prospective payment system. We believe that the Medicare reimbursement system must be changed to promote value, and we strongly support policies that link quality measurement to performance-based payment. We are pleased that under ACA the Secretary will establish performance standards that reward hospitals based on either attaining a certain performance standard or making improvements relative to a previous performance period. Hospitalists, who care for more hospitalized patients than any other physician group and lead system change and quality improvement efforts, will be critical to improving the performance of hospitals under this program.”

As mentioned above, the VBP program poses some risks to hospitalists. We cannot improve our hospital’s performance by ourselves, no matter how well motivated and trained we are. Hospitalists tend to attract a group of patients who traditionally have less satisfaction with their hospital experience (e.g. acutely ill patients admitted through the ED). But for more than a decade, hospitalists have been touting our goal to change the system for the better and to strive to be rewarded for value and performance, not simply for the doing.

In some ways, hospitals’ financial support of hospitalist groups has been predicated on the value we currently provide in efficiency (e.g. decreased length of stay, better use of resources) and effectiveness (e.g. improved measurable quality). The VBP program in ACA is just a first big step for the largest payor of hospital care—CMS—to change the ground rules.

Well-prepared hospitalists can provide leadership and help deliver their institutions to the top half of hospitals (those that will receive bonus payment) and, at the same time, begin to change the culture of their hospital to provide their patients with a better clinical outcome and a better patient experience.

Congress and President Obama are our allies here. A million dollars should get your hospital executives’ attention. Now is the time for hospitalists—with SHM’s help—to step up and show what we can do. TH

Dr. Wellikson is CEO of SHM.

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